The Dow plunged more than 1,000 points at the open and the S&P 500 sank into correction territory on Monday as global fears about China's economic turbulence mounted.
The Dow is on track to suffer its worst percentage decline since 2008, the beginning of the scariest financial crisis since the Great Depression.
The wave of selling began overseas. China's Shanghai Composite plummeted 8.5%, wiping out all of its massive gains so far this year. Not only has an apparent bubble in Chinese equities popped, but the country's economy may be slowing more than feared. Last week's big selloff gathered serious momentum after China said its manufacturing activity – a critical metric on growth – tumbled to a six-year low in July.
China is the world's second-biggest economy, and its explosive growth in the last two decades has been the engine for the global economy. Its enormous appetite for raw materials like oil, copper and iron ore fueled global growth, especially in emerging markets like Brazil that are rich in natural resources.
Fears have grown so much about the health of China's economy that the S&P 500, made up the largest U.S. companies, is now sitting in "correction" territory – a 10% decline from a recent peak. Both the Dow and Nasdaq slipped into correction mode on Friday, the first since 2011.
The selling hasn't been limited to stocks. Crude oil plunged below $39 a barrel on Monday for the first time since 2009. A global economic slowdown is eating into demand for oil at a time when supplies remain extremely elevated.
However, a look back shows there is no comparison to the problems in 2008 and 2009. The U.S. economy shrunk by 0.3% in 2008, and by 2.8% in 2009, which was the biggest annual drop in more than 60 years, in comparison to second quarter growth this year of 2.3%.